Oil Search is buying rival InterOil Corp for $US2.2 billion ($A3 billion) in a deal which will create a massive independent oil and gas group in Papua New Guinea.
At the same time, Oil Search has taken some of the risk out of the deal by signing an exclusive memorandum of understanding with French group Total to take equity positions in the InterOil assets.
Oil Search will sell to Total, for a yet to be determined amount of cash, 60% of the interest acquired from InterOil in Petroleum Retention Licence 15 and 62% of InterOil’s exploration assets.
The agreements result in Oil Search increasing its stake in the Papua New Guinea LNG Project, one of Asia’s largest undeveloped gas fields, to 29% and Total increasing to 48.1%.
InterOil chairman Chris Finlayson says the transaction delivers significant value to shareholders through the opportunity to benefit from ownership of shares in the combined entity.
“The transaction will enable InterOil shareholders to continue to benefit from the value created through the commercialisation of gas resources along with exposure to Oil Search’s portfolio of high quality assets,” he says.
The implied value of the share/cash deal is $US40.25 per InterOil share.
Oil Search is being advised by Goldman Sachs and Macquarie Capital. InterOil has appointed Morgan Stanley, Credit Suisse Australia and UBS.